Barroom Brawl

Cafe Iguana. Thursday, August 28, 9:00 p.m. It's surprisingly easy to forget that this nightclub is located in the middle of a suburban mall. The place is packed, all booze and libido and mainstream dance music so loud that a woman has to scream, "It's been like this since seven!" to her friend three feet away.

Bartenders are a blur, flipping glasses in the air, serving several drinks at a time, tripping police sirens and tooting referees' whistles for no reason other than to add to the noise. Men in rumpled suits prowl for younger prey, who drift around in packs of two and three, big haired, well-inflated. An employee dressed as a giant lizard is sidling up to women and drooling, "What's up, babe?"

In Fat Kats, a quieter adjoining bar upstairs, smugness abounds. Here, clustered around a couple of tables, the clubs' owners are toasting a legal victory. More than two months earlier, after a lengthy undercover investigation, the state's Division of Alcoholic Beverages and Tobacco (ABT) suspended Cafe Iguana's liquor license, alleging that drugs were being sold openly in the two clubs, which operate under the same license. That night state agents also raided the owners' nearby nightclub Marsbar, with similar results.

Unable to sell alcohol while their case was pending, the partners were forced to close the doors of all three businesses. All summer they battled the state to get their licenses back. Finally, on August 25, they succeeded -- after a state administrative judge ruled in their favor and a circuit court judge interceded on their behalf. By suppertime, 3000 invitations to this evening's grand reopening at Iguana were in the mail: open bar from 7:00 to 11:00. It didn't take much more than that to fill the place. Within an hour after opening, patrons couldn't remember why the liquor was free.

Upstairs, though, some aren't likely to forget so soon. "The ABT needs to be dissolved!" erupts Steve Caputi, director of administration for Chameleon Concepts Inc., the Hollywood-based corporation that owns a small empire of South Florida nightspots including Cafe Iguana, Marsbar, Fat Kats, a second Cafe Iguana in Fort Lauderdale, and Bermuda Bar and Grill in North Miami Beach. "When you can turn evidence like $235 worth of cocaine over a three-month period into the need for an emergency suspension order, you need to go back to the statutes and learn what crime really is!" He swigs his bloody mary through a straw and puffs out his chest. "You know what it is? It's the rise of communism into American society. You can't arbitrarily usurp life, liberty, and property without due process. Hey, the only thing they didn't do was kill us."

The arrival of a waitress wearing almost completely cutoff jeans and a T-shirt bunched in a knot at her breasts is enough of an interruption to distract Caputi, and he wanders off. But attorney Louis Terminello, who represented the clubs against the ABT, quickly takes up where his client left off. The issue isn't whether drugs were being sold on the premises, says Terminello, a heavyset man with a penchant for heavy metals: gold watch, gold rings, gold bracelet. During the hearing he didn't dispute allegations that the bathroom attendants were peddling cocaine. But the dealing was taking place without the knowledge of the management and the owners. Had they known, the attorney insists, they would have put an end to it immediately. "It certainly did not constitute a sufficient danger to the health, safety, and welfare of the community to shut the place down!" Terminello rails, making reference to the state's criteria for license revocation. The division made a "garbage case" against the club owners, he adds. "They pursued it against the wrong guys. These guys [Chameleon Concepts] have the money to fight. And we kicked the division's ass."

The mustachioed lawyer's bravado aside, ABT did get clobbered. And the defeat, along with other recent enforcement actions, has highlighted the increasingly controversial and hostile relationship between the agency and the multibillion-dollar industry it regulates. ABT has something of a split personality. On one hand it's responsible for selling licenses and collecting beverage taxes, duties that generate a significant amount of revenue for the state. (Last year alone, licensing fees, taxes, and penalties totalled about $1.3 billion.) On the other hand, ABT agents are officers of the law, licensed to carry weapons and sworn to enforce the state's liquor laws, as well as to ensure that no illegal activity of any sort takes place on licensed premises. Punishment can range from fines to revocation.

Under the best of circumstances, it's a delicate tightrope to walk. And an increasingly vocal constituency of business owners, lawyers, and lobbyists -- especially in South Florida, which boasts the highest concentration of bars and nightclubs in the state -- says that in the past year the ABT has lost its balance. "There's no cooperative relationship for the most minor issues," declares James Greer, a Melbourne-based beverage law consultant. "Clearly the message has been sent down to the district offices: Get tough. From an industry standpoint, no one has ever said the division should not enforce the beverage law and file cases. But no one says there shouldn't be a working relationship."  

For its part, the division is defiant. "It's a much tighter ship now in terms of enforcement," confirms Edward J. Towey, a spokesman for ABT's parent agency, the Department of Business and Professional Regulation. "There's less of a willingness to cut a deal, a lot less of an inclination to let things slide." For years, Towey asserts, the alcoholic beverage industry has had the ABT "in its lap." But not any more.

Only now, so many months later, can Dan Miller laugh about the events of June 12, the night ABT agents and Metro-Dade police officers made their unannounced visit to the Town & Country Center just off Kendall Drive west of the Turnpike. "It was like a bad episode of Cops," he chuckles. But at the time there was nothing funny about it. Miller, the club's general manager, was preparing to bite into a barbecue chicken pizza when he glanced up at the surveillance monitor in the management office and saw what he describes as "bodies rushing around" outside the club. The time was 9:50 p.m. About 75 people were inside, the lingering happy-hour crowd bleeding into the regular nocturnal scene.

"Just then I hear my front-door security guard on the radio -- 'Dan, I think [ABT] is here' -- and then I see one of the agents reach out and grab the radio and pull it away from him," Miller remembers. A phalanx of about 30 law enforcement officers, dressed for war, stormed through the front door at a quick trot. Another contingent flooded through an upstairs entranceway into Fat Kats. Some were cloaked in black from head to toe, ski masks to jackboots. "Along with that you got Metro-Dade in their windbreaker-type jackets. And, of course, the ABT with 'ABT' splattered across their backs and chests," says the manager.

The officers, all of whom appeared to have side arms, ordered Miller to turn on the lights and commanded the DJ to cut the music. Patrons were herded into a cluster on the dance floor. "The cops were saying, 'Step away from the bar, put down your drinks.' People didn't know if we were being robbed, whether it was a terrorist organization," Miller shudders. "It was a very tense situation." As several bathroom attendants and patrons were handcuffed and taken away on charges of drug dealing or possession, agents set to work taping up notices: "Alcoholic beverage license SUSPENDED by order of the director, Division of Alcoholic Beverages & Tobacco, State of Florida, Department of Business Regulation." Then an ABT investigator presented Miller with the suspension order, strode into the office, and tore the club's liquor license from the wall. Miller later learned that a similar spectacle was unfolding across the mall at Marsbar. The busts made the nightly television news: A camera crew from WTVJ-TV (Channel 6) had tagged along during the raid, though Maj. Jorge Raul Herrera, commander of the ABT's Miami office, says he has "no idea" who tipped off the station.

This was the culmination of Operation Bar Bust, a three-month undercover investigation that began with a tip to Metro-Dade police that bathroom attendants at Cafe Iguana and Marsbar were operating a small-scale cocaine-peddling ring. In the ensuing weeks, Metro-Dade and ABT undercover officers were able to make eight drug buys (for a total of $235 worth of cocaine) at Cafe Iguana and Fat Kats, and another eight ($220 worth) at Marsbar, for a haul of just under ten grams.

In order to revoke a club's liquor license for on-premises drug sales, ABT needs to show that the dealing is "open and notorious," and that it is taking place with the knowledge of employees, managers, or owners. (According to Major Herrera, the amount and dollar value of the coke are irrelevant. "That's only the cocaine we were able to purchase [during the investigation]," he notes. "Can you imagine the amount sold to patrons?") The agency thought it had enough proof: Not only were bathroom attendants themselves doing the dealing, but other employees were walking in and out of the bathrooms during most of the transactions. Furthermore, the agents had seen women standing in line at the door of the men's restroom to score at Fat Kats.

Department of Business and Professional Regulation spokesman Edward Towey says suspensions such as the ones levied on Chameleon Concepts are typically reserved for criminal enterprises like drug dealing and theft rings. "Emergency orders are for emergencies," Towey asserts. "And those cases were right out of the textbook: It was a matter of the health, safety, and welfare of the general public, because the general public understanding is that illegal drug sales and use are an endangerment to society. That may not be everybody's opinion. But folks, that's the law!"  

With regard to pure statistics, Operation Bar Bust was by no means out of the ordinary; in each of the past three years, ABT has filed an average of 25 emergency orders. But the action was remarkable in another sense: Chameleon Concepts is a powerful beacon on South Florida's nighttime landscape. The four owners share a combined 60-plus years of experience in the club industry, and their clubs do more than $15 million worth of business every year, says Joe Delaney, the group's vice president in charge of development. The corporation's majority shareholder, David Lageschulte, owns at least fifteen Hooters restaurants, as well as a piece of Dan Marino's American Sports Bar & Grill. Word of the revocation roared through the local club network.

Chameleon Concepts retained Louis Terminello, an ABT agent himself from 1978 to 1989 and a partner in the Miami-based law firm of Chadroff, Terminello & Terminello, one of the foremost authorities on beverage law in the state. The attorney offered the division a settlement: payment of a $35,000 fine and a promise that the club would remain closed for 60 days. When ABT rejected the deal, Terminello requested an administrative hearing, where a judge would hear evidence and then submit a recommendation to the agency's director.

For two days, June 19 and 20, Administrative Law Judge J.D. Parrish listened to testimony from beverage agents, Metro-Dade detectives, the clubs' owners and staffers, and several witnesses. In Chameleon Concepts' defense, Terminello argued that the dealing was going on without the knowledge of the owners and employees, and also that the accused bathroom attendants weren't technically staffers but rather independent contractors supplied by a valet company.

A month later, on July 23, the judge issued her opinion: The liquor licenses should be reinstated. In a resounding rebuke of the ABT, Parrish found no evidence of negligence on the part of the clubs. "None of the purchases described herein were of such a nature or were so conspicuously transacted that a reasonable person would have known illegal sales were taking place," she wrote in her recommendation, which also noted the clubs' efforts to institute and maintain an anti-drug policy as required by state law.

Instead of accepting or rejecting the judge's recommendation, ABT director Richard A. Boyd postponed making any decision for several days, a move Chameleon Concepts' Joe Delaney terms "a personal vendetta" and attorney Terminello calls "jerking us around. With this director you're either guilty or you're guilty! It's unconscionable: You couldn't find a better example of abuse of authority." According to the attorney, his clients were losing about $60,000 every week they were forced to remain out of business, and their employees -- who number more than 200 -- were laid off.

Terminello filed a complaint in Leon County Circuit Court on August 1, asking for a judge to compel Boyd to make a decision. Two weeks later Circuit Court Judge Charles McClure ordered that action be taken within ten days. On the tenth day, the ABT director finally returned the licenses. By that time the clubs had been shut down by the state for more than two months.

Terminello believes ABT was trying to wage a war of attrition: The longer Boyd delayed a decision, the more likely it was that Chameleon Concepts would agree to a settlement. "They wanted so much not to lose that they were determined to turn it into a victory of some sort," the attorney argues. "They wanted to save face, that's all."

Completely untrue, counters Boyd. "If I want to adopt the [administrative judge's] recommendation in toto, then yes, I can issue an order the next day," he explains. "In this case I disagreed with some of the things she said." Boyd says he had to order the transcript of the hearings -- a two-volume document "eight inches high" -- read it, and then sit down with his attorneys to discuss all the legal implications. "This takes time!" he points out. Furthermore, he adds, state statutes permit him 90 days within which to respond to the hearing judge's recommended order: "This case was actually expedited."

Still, Terminello contends that the Iguana case, coupled with ABT's handling of other recent cases, suggest an agency that is more interested in grubbing statistics than in making solid cases. "In the old days, when they did these things right, they didn't lose any cases," the attorney says. "They still win cases when they do things right. It's when they try to cut corners that they lose."  

The ABT's roots date back to the Noble Experiment. With the repeal of Prohibition in 1933, states got control of the distribution and taxation of alcoholic beverages. In turn, Florida created the earliest manifestation of the ABT, called the Beverage Department, which was principally responsible for licensing and beverage tax collection. (The state left it to local governments to determine whether and how alcohol could be served.)

And it was around that time, says former ABT director John J. Harris, Jr., that agents acquired the status of lawmen. "There was a lot of moonshine activity in Florida," says Harris, now a consultant on governmental affairs for the law firm Holland & Knight. "The Beverage Department had law enforcement power primarily for stopping moonshine problems and bootleg-liquor people trying to sell in dry counties." And because enforcement sometimes got a little violent, agents were outfitted with firepower to counter what the bootleggers were packing.

"The division kind of took a role in enforcing the state's morals," Harris goes on. "In the early years, bars were dimly lit, had no windows, were anything-goes-type places. It's a contrast from today, when licensees include everything from the biggest hotels to the biggest airlines to Sam's place out in the woods."

By the Seventies, when the agency was swallowed up by the Department of Business and Professional Regulation, dry counties and moonshine were, to say the least, on the wane, and there was a shift in emphasis from an enforcement-heavy, gun-wielding agency to more of a bureaucracy responsible for licensing and regulation. Still, ABT remains the only agency within the department whose agents are sworn law enforcement officers.

"During my career I saw a transition in the way the state regulated the alcoholic beverage agency, and that change became faster and faster during my administration," recalls Harris, who joined ABT in 1968 as a part-time mailroom clerk and worked his way up to the directorship in 1993. "The change was one in which the division was interested in working with the industry, trying to solve problems, trying to help people get through problems that they encountered with the government."

The transition did not come easily. In part this was because it required changing the mindset of employees who'd been hired during an era when alcohol was regarded as evil and agents were required to storm into the woods and bust up stills. But some people also came to believe during Harris's administration that the relationship between the agency and the industry it regulated was getting too cooperative. In 1995 the Florida Department of Law Enforcement received anonymous allegations that the director had received kickbacks in his handling of cases against licensees. Though the agency found no evidence to warrant an investigation, Gov. Lawton Chiles's inspector general subsequently pursued allegations that Harris had overly cozy ties to the industry. The inspector also delved into the deep schism that had developed between Harris and his 170 agents, many of whom felt the director was too lenient on beverage-law violators. The inspector general's report, released in March of last year, found no grounds to suspect criminal wrongdoing on Harris's part, but it was scorching nonetheless. "It is questionable whether Director Harris can gain the trust and respect of ABT's sworn law enforcement staff," the document read in part.

Within months Harris resigned. Boyd, an ABT employee since 1971, was named as his replacement. The new director's mandate was clear: Placate the troops and shore up enforcement. "The mission of the division, as far as I'm concerned, is 'protection and collection': protection of the health, safety, and welfare of the public by making sure the people getting into the business are fully qualified and by making sure the people already in the business are not violating the law and jeopardizing the health, safety, and welfare of the public; and the collection of the surcharge and excise taxes.

"As far as our willingness to deal," Boyd continues, "we're always willing to negotiate the settlement of a case. But I'm not going to lessen a penalty for what I would consider an inappropriate reason, whereas past administrations were willing to lessen the penalty for whatever reason they wanted to." When meting out punishment, the new director asserts, he adheres to the statutory penalty guidelines as consistently as he can.

"That's why Terminello's invective level has risen," speculates spokesman Edward Towey, singling out one of ABT's most vocal adversaries. "Some of the things he used to get he's no longer getting. I know it's upsetting to him, but dem's the rules."  

To some in the beverage industry, Boyd's hard-nosed approach harks back to the era when alcohol was held in ill repute. While Harris himself stops short of commenting on the current administration, others say Boyd seems to be swinging ABT back toward moral fervency. "John Harris believed in education and believed that as long as the businesses were training people and making a great attempt to do things right -- such as serving alcohol responsibly, keeping drugs off the premises -- then there were reasons to mitigate cases, and that people were deserving of a second chance," says Lori Chadroff, the daughter of Terminello's law partner Sy Chadroff and president of Responsible Vendors, Inc., a firm that educates businesses about how to comply with state beverage laws. "Boyd is less understanding, shall we say, of that attitude."

Adds Horace Moody, president of the Tallahassee-based Beverage Law Institute and a former ABT chief of law enforcement: "Here you have an agency that regulates an industry that generates millions of dollars for the state. John [Harris] had a very good understanding of the role the agency played in protecting that revenue. He worked with and encouraged the businesses rather than slapping them around." Under Boyd, Moody says, it has been "much more difficult to work out solutions" to administrative cases.

In a recent action involving the Cameo Theater, a solution was worked out -- but only with considerable bad blood. This past spring undercover officers from the Miami Beach Police Department, ABT, and the U.S. Drug Enforcement Administration conducted a two-and-a-half-month investigation at the cavernous South Beach nightclub, during which time officers were able to make repeated cocaine buys.

Terminello, who represented the Cameo in the matter, says ABT's legal team approached him with an offer at the end of a two-day administrative hearing, and that after some discussion the sides reached an agreement: The division would drop the case if the Cameo paid $35,000 in fines and investigative costs, hired two more security guards, assigned at least one member of its security force to patrol the bathrooms, canceled its popular teen nights, and barred admission to anyone under age 21.

Both Boyd and the Department of Business and Professional Regulation's assistant general counsel Miguel Oxamendi refuse to comment about the settlement. "I don't want to get into the rationale for our legal decisions," says Boyd, who signed the consent order July 9.

Terminello, as usual, isn't afraid to proffer his opinion: "It was a garbage case. Pitiful!" he declares, noting that DEA agents and Beach police detectives gave conflicting testimony, specifically regarding whether the deals were "open and notorious." Terminello says he urged his clients to take the settlement because the alternative would have been -- as in the case of Chameleon Concepts -- to fight a longer battle, and Cameo owner Zori Hayon didn't think he could afford to stay out of business that long. "I feel bad now that I recommended that they take the settlement," Terminello concludes, "'cause we woulda kicked their ass on that one, too."

Cameo manager Skip Odeck says he feels as if holding a liquor license automatically comes with a presumption of guilt. He rattles off an inventory of security measures that the club, a mainstay on the South Beach nightlife scene for the past decade, has taken to fight the incursion of illegal activity: off-duty police officers, an undercover security firm, surveillance cameras throughout, a training program for employees. "We're not stupid," he snorts, pointing out that the Cameo raid followed those on the Chameleon Concepts clubs, not to mention the well-publicized (and equally controversial) busts of three other South Beach clubs nearly two years ago. "Why would we do all that if we were promoting the sale of drugs? I liken it to the Secret Service: They surround the president and someone still shot Reagan. If they'd come to us and said that we had a problem, I would've given them an office."

Echoes Chameleon Concepts' Steve Caputi: "They're supposed to help us, not act like the Gestapo. They could've picked up the phone and told us we had a problem. But they didn't want to solve the problem. They wanted to crucify and get headlines. 'Operation Bar Bust,'" he sneers. "We called it 'Operation Ball Bust.'"

Boyd sloughs off these complaints as the grousing of a disgruntled minority. "Ninety-five percent of the licensees we have are law-abiding and do the right thing," he asserts. "And then there's the five percent who always want to grumble and accuse us of being -- to use their term -- draconian. They have violated the statutes and they want a free ride on things. And I'm not necessarily agreeable to that."  

If it's only five percent who are making noise, it's a very noisy minority. According to James Greer, chairman and CEO of Florida Beverage Law Consultants, lobbyists for the powerful beverage industry have put pressure on the state legislature to reduce or eliminate the police powers of beverage agents, essentially reducing ABT to a licensing and taxing authority. "And of course," Greer says with a chuckle, "the division went crazy."

Terminello adds that there's also an effort afoot to provide more relief for bars and clubs that have been busted. He believes businesses that have received an emergency order should get an immediate opportunity to show that the alleged emergency conditions no longer exist. (Proof in the case of Cafe Iguana and Marsbar, for example, would be that the bathroom attendants had been fired.) The license would then be returned, pending the outcome of an evidentiary hearing. The attorney says three legislators are very interested in the proposal, but he refuses to name them.

Meanwhile, a group of Miami Beach licensees has found a modicum of relief elsewhere: local police. Notwithstanding the recent scandal involving corrupt cops allegedly extorting payoffs from illegal after-hours clubs, Steve Polisar and Woody Graber, chairman and vice chairman of the Miami Beach Entertainment Association, speak of a newfound "spirit of credibility and cooperation" and "an honest line of communication" between the police department and the club world. That relationship began after three raids on South Beach clubs around New Year's Eve 1995. In each case officers stormed the clubs late at night, at the height of the party hour.

The timing of the raids caused an uproar among club owners and had the remarkable effect of coalescing a normally competitive community. Representatives from South Beach clubs held a series of meetings with local police officials. The first order of business was to discuss the manner in which emergency orders were served. The ABT has maintained that its agents must perform their operations at the busiest time of night if they're to have any chance of apprehending drug suspects. But Graber and Polisar argued that the economic damage to the city caused by bad publicity would far outweigh the good of a few arrests.

"We felt -- and ultimately they agreed -- that it's self-defeating to hurt the whole district in exchange for getting publicity that they were successful in accomplishing a bust on a particular club," says Polisar. "The long-range situation could be better served if there is communication to the club before there's an investigation, thereby giving them an opportunity to correct the problem on the assumption that they are responsible owners. It's in the better interest of the state and the clubs if there's an honest attempt to correct the problems."

Well, to a point, says Miami Beach Assistant Chief James Scarberry. While he agrees that the relationship between the police and the entertainment industry is healthy, he doesn't want to leave the impression that the department is soft on beverage-law violators. If a "legitimate" criminal complaint is brought to light by a "legitimate" source, then police will open an investigation without notifying the target. "But if we are receiving nothing but miscellaneous, anonymous information about criminal activity, then we'll contact the club and tell them," Scarberry explains, adding, "We don't have a goal of closing clubs on South Beach."

Whatever rapport may have been reached in that corner of clubland, the closings there and elsewhere in the county will inevitably continue. Owing to its sheer volume and variety, Dade's nightlife scene has always stood apart from what goes on in the rest of the state. Not surprisingly, the local ABT bureau is Florida's biggest and busiest, filing more emergency orders than any other. Indeed, ABT officials in Tallahassee seem almost perplexed by the ruckus being raised in the South Floridian Gomorrah.

"We do so many of these cases around the state, and I'm still amazed people down there make such a big deal over the closing of a bar," notes department assistant general counsel Miguel Oxamendi, sounding somewhat bewildered. "It becomes a front-page deal!" As far as he can recall, says Oxamendi, the only other place a club- or bar-closing garnered TV news footage was in West Palm Beach -- "and that was only for five seconds.

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